Monthly Market Update: October 2021

Early in the month, Democratic and Republican Senate leaders haggled over a short-term deal to increase the debt ceiling that ultimately prevented the U.S. from reaching the brink of a payment default. It was agreed that they would raise the limit by an amount that is sufficient to tide the Treasury over until December, when Congress will have to vote again to avoid missing obligations such as the payment of federal salaries, benefits and Treasury securities. The lack of confidence in Congress’s ability to reach an agreement at the beginning of the month briefly impacted U.S market performance but once a path forward was created, equities rebounded. 

Many equity indices recorded new highs during the course of the later part of the month. U.S. stocks benefited from a strong earnings season, with more than 80% of companies beating earnings expectations, driving the S&P 500 to a new peak. Chinese indices also reported positive momentum, as the challenged property sector that we mentioned in our previous monthly update showed signs of recovery.

Supply chain constraint, and the impact it is having on inflation both in the short and long term, continues to make headlines around the world. As the inoculation rate in many countries  improves, investors are now focused on what the post Covid-19 world will look like if inflation does continue to rise. In saying this, the level of pent-up demand, solid balance sheets and capital available for deployment should mitigate the possibility of stagflation. 

The impact of worker shortages also continues to be felt around the U.S despite the end of more generous additional unemployment benefits. It was expected that as these welfare payments ended, workers would return; however, the labor force declined last month and participation rates remain below their pre-pandemic peak. Those that are back at work are enjoying wages that are 5.5% higher than this time last year, and those that are available to work are being snapped up by employers with the unemployment rate falling to 4.8%.  

Fixed income markets didn’t enjoy the same positivity as equity markets over the month largely due to supply chain constraints and prolonged inflationary concerns. Booming energy prices have caused markets to price in a faster pace of tightening from central banks than previously indicated. The 10-year U.S. Treasury yield reached 1.7%, with large increases in shorter-dated yields. October was a weak month for high yields, with the index experiencing its first monthly total return loss in 2021. Among sectors, Energy led the gains, benefiting from higher oil prices, while Cable & Media lagged. 

Demand for ​​investment-grade fixed income from institutional investors is expected to remain strong going forward as they have high levels of cash that needs to be invested. If the market behaves in a similar way to the previous period of tapering bond purchases, then bond holders might be glad to hold. If rates rise as a result of tapering, the extra income could be an opportunity for investors to diversify their portfolios with meaningful high quality fixed income exposure.

Real estate

All eyes have been on Zillow Group Inc., an American online real estate marketplace company, over the last couple of weeks following the release of their disappointing Q3 results fueled by their failed Zillow Homes business. Zillow entered the business in late 2019 with hopes of using its popular marketplace site and massive data sets to profit from buying and selling homes in high volumes. However, it had begun listing homes for less than it had paid for them, with approximately two-thirds of Zillow Homes listings underwater according to KeyBanc Capital Markets. Zillow was only able to sell 3K of the 10K homes that they purchased during Q3, leaving them with a large inventory that forced them to reevaluate the business model and shut it down completely. The Zillow story is forcing investors to consider whether algorithms will ever reinvent the way that real estate is transacted. 


The recent Frieze week sales in London, which are anchored around the acclaimed Frieze Art Fair, signaled a return to pre-Covid bidding energy within live salerooms. Christie’s and Sotheby’s, the two biggest global auction houses, had combined contemporary art evening sales during this Frieze week that generated $178M, 30% above their combined pre-sale estimates, and 20% above their combined sales in October 2019, the last ‘Frieze Week’ sales prior to the global shutdown.1

1. Athena Art Finance.

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